3 Signs that it's Time to Exit Your Advisory Firm

DEAR ADVISORS, 

There’s no time to take it easy! It feels nice to sit back and enjoy the comfortable income from years of hard work building your advisory firm. But this mindset is causing your advisory firm to lose value now and in the future. From a business perspective, how do you know when it’s time to exit your own advisory firm? There are 3 big red flags, but if you read to the end, we have a solution for you! 

• Decapitalizing Your Advisory Firm 

  • If you're pulling extra money from your business to support your lifestyle now or in retirement, you're decapitalizing your business (aka sucking resources out). This includes taking all available net profit, if none of your expenses were for marketing. But it definitely includes cutting expenses to take more cash, and taking out a business loan to cover personal expenses. 

  • The greatest risk comes during internal transfers where the owner needs additional years of income, and so stays on as a consultant, when the firm needs that capital for other projects. 

• Not Growth-Oriented

  • During the life cycle of an advisory firm, it’s common to hit a plateau once you’re at full capacity. If you’re running a lifestyle practice, it’s still important to do marketing to bring in enough clients to make up for those who inevitably leave. If you’re looking to grow beyond the plateau, then you’ll need to spend extra to increase marketing and hire more advisors to support that growth. Either way, if you’re not excited about growing your advisory firm, it might be time to hand over the reins to someone who is. 

• Not Thinking about the Future

  • The advisory industry is a seller’s market, so you’ll always be able to find someone interested in buying your book. But you won’t get anywhere near the price you expect or need. You’re likely to get top dollar for your advisory firm if you have strong cash flow and a solid track record of growth. These are both investments in the firm that benefit you and the next generation.  

  • Instead of selling, you might transition to a family member or child. This is a sad idea of a gift because it'll be tougher for them to succeed. It’s disrespectful and even harmful to burden them with a firm that needs a huge infusion of cash and sweat equity to return to normal cash flow and growth percentages.

If you’re starting to see these red flags in your advisory firm, don’t panic! It simply means that you have 2 options. The first option is to get your firm back on track to grow. But, if you’re not feeling up to the challenge, then it might be time to sell. This can happen at any age, or any life cycle of the advisory firm. It’s important to ask yourself regularly if your work still excites you or if it’s time to move on? Most of the time, we can’t see this for ourselves. Hiring your own financial planner or business coach is a great way to have this conversation on a regular basis. That’s part of what we do at Ellevate Advisors! We offer a free consultation to help you answer this question and ultimately secure the future of your family and your advisory firm!

Warm regards,

Brooklyn

P.S.

At Ellevate Advisors, we believe that advisors deserve to retire too. What does that look like for you, your family, and your business? Let’s figure it out together! Click here to schedule an initial phone call with our team today or get to know me on my bio here!